The crypto honeymoon is over for now as analysts warn of a major first-quarter profit squeeze
Several major investment firms have preemptively downgraded Coinbase and other platforms as a sharp drop in trading activity and falling token prices threaten to derail upcoming first-quarter earnings results.
What to know:
- Wall Street analysts are cutting forecasts for Coinbase and other crypto firms as trading volumes and token prices slump to their weakest levels since late 2023.
- Barclays downgraded Coinbase and now expects significantly lower profitability, while Oppenheimer trimmed its volume and revenue estimates but remains relatively more optimistic.
- Pockets of strength in stablecoins and newer businesses like derivatives and tokenized assets have yet to offset the slowdown in core trading, prompting analysts to reset expectations ahead of upcoming earnings reports.
Barclays took the most direct step, downgrading Coinbase (COIN) and warning that “global crypto trading activity has declined to a level not seen since the end of 2023.” The bank added that “absent a resurgence in near-term crypto trading activity, we see profitability under pressure at Coinbase.”
The slowdown is visible in the data. Coinbase’s March trading volume marked “the lowest volume month since September 2024,” Barclays wrote, with April showing “no signs of improvement.” For the first quarter, the bank estimates volumes fell roughly 30% from the prior quarter.
Coinbase and other exchanges charge fees on each transaction they facilitate, meaning lower volumes will lead to less revenue.
The mechanics are straightforward. When markets turn quiet, many traders step back. A retail user who once traded weekly during a rally may stop altogether when prices flatten. Multiply that behavior across millions of accounts, and exchange volumes drop quickly.
